More than 1,000 people perished in early October 2005 as Hurricane Stan’s torrential rains triggered mud slides on lands already saturated by a heavier-than-usual rainy season. Especially hard hit were the western highlands around Lake Atitlán, where whole communities washed away. Together with rising energy costs, the damage to roads and bridges threatened the moderate economic growth that Guatemala had enjoyed. In May the World Bank agreed to provide $780 million between 2005 and 2008 to promote Guatemalan economic development and fight poverty in collaboration with President Óscar Berger’s “Vamos Guatemala” program. That program sought to stimulate economic growth through investment in housing, infrastructure, tourism, finance, and forestry and to increase productivity through technological innovation and growth of exports. Guatemala also signed agreements with Mexico and the other Central American states to conserve energy and reduce fuel costs.

Guatemala ratified the Central America–Dominican Republic Free Trade Agreement (CAFTA-DR) in March. Amid noisy protests from labour unions, the government argued that CAFTA-DR, scheduled to go into effect on Jan. 1, 2006, would increase exports and reverse the trend of Guatemala’s losing markets to Asian producers, especially in the garment industry. Soon thereafter, U.S. Secretary of Defense Donald Rumsfeld visited Guatemala and declared that the U.S. would resume military aid to the country. U.S. military aid had been frozen because of human rights violations by the Guatemalan military. Rumsfeld said that the restoration of aid would help the Guatemalan army combat terrorism, drug trafficking, and juvenile gangs. Following the catastrophic landslides in October, Rumsfeld met again with Guatemala’s security ministers to discuss both disaster relief and U.S. security concerns. President Berger also met with Brazilian Pres. Luiz Inácio Lula da Silva, which resulted in several new agreements between the two countries, including a plan to import more Brazilian goods for reexport to the U.S. under CAFTA-DR.

Gang violence and drug-related crimes continued to be a problem in Guatemala. The vigilante death squads, which had assassinated gang leaders and others, appeared to be privately organized and tolerated by the government. Criticism of the police, however, led to the firing of more than 500 of the National Civil Police’s 22,000 officers for corruption, kidnapping, assault, drug trafficking, homicide, and rape. Of particular concern was the rising incidence of violent crimes against women. The government announced in June that it would try to attack the socioeconomic roots of juvenile gang violence, but on August 15 at least 35 gang members died in Guatemalan prison riots that some believed were encouraged by officials.